Correlation Between High Income and One Choice
Can any of the company-specific risk be diversified away by investing in both High Income and One Choice at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining High Income and One Choice into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Income Fund and One Choice 2050, you can compare the effects of market volatilities on High Income and One Choice and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in High Income with a short position of One Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Income and One Choice.
Diversification Opportunities for High Income and One Choice
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between High and One is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding High Income Fund and One Choice 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Choice 2050 and High Income is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on High Income Fund are associated (or correlated) with One Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Choice 2050 has no effect on the direction of High Income i.e., High Income and One Choice go up and down completely randomly.
Pair Corralation between High Income and One Choice
Assuming the 90 days horizon High Income is expected to generate 4.95 times less return on investment than One Choice. But when comparing it to its historical volatility, High Income Fund is 3.22 times less risky than One Choice. It trades about 0.24 of its potential returns per unit of risk. One Choice 2050 is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 1,532 in One Choice 2050 on September 4, 2024 and sell it today you would earn a total of 53.00 from holding One Choice 2050 or generate 3.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Income Fund vs. One Choice 2050
Performance |
| Timeline |
| High Income Fund |
| One Choice 2050 |
High Income and One Choice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Income and One Choice
The main advantage of trading using opposite High Income and One Choice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Income position performs unexpectedly, One Choice can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in One Choice will offset losses from the drop in One Choice's long position.| High Income vs. Guggenheim High Yield | High Income vs. Calvert High Yield | High Income vs. Ab High Income | High Income vs. Siit High Yield |
| One Choice vs. One Choice 2045 | One Choice vs. One Choice 2040 | One Choice vs. One Choice 2030 | One Choice vs. One Choice 2035 |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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